Election threatens tax credits for low-income housing
February 6, 2017 1:24 PM
Bill Clark-Pool/Getty Images
Donald Trump's unexpected election victory in November, coupled with Republican majorities in Congress that are expected to lower corporate taxes, has lowered the market value of housing credits.
By Kate Giammarise / Pittsburgh Post-Gazette
Oakland Affordable Living is part of a plan to bring needed affordable housing units to one of the city’s most bustling and vibrant neighborhoods — but that plan got a little harder after the November election.
The 49-unit project calls for 25 new units and 24 rehabbed units at Allequippa Place in Oakland — a neighborhood with good public transit access, a plethora of job opportunities at its hospitals and universities, and in need of affordable housing for non-students, said Wanda Wilson, executive director of the Oakland Planning and Development Corporation.
“It's a very important project … in the neighborhood [both] to be able to improve long-abandoned vacant properties and improve a gateway into West Oakland,” said Ms. Wilson.
However, post-election changes in the low income housing tax credit market have left them with a gap in the project's budget. Ms. Wilson said the development is still moving forward, but her organization has applied to the Pennsylvania Housing Finance Agency to make up the difference, and they aren't alone.
The low income housing tax credit is the primary program for creating new affordable housing in the United States. Created in the 1980s, various state entities — in Pennsylvania it’s the Pennsylvania Housing Finance Agency — allocate a certain limited amount of tax credits to developers every year though a competitive process. Investors then buy these credits.
In July, the agency allocated more than $40 million in tax credits for projects statewide, including seven developments in Allegheny County.
The program is critical for funding housing for low-wage workers, seniors, and people with disabilities, said Cindy Daley, policy director for the Housing Alliance of Pennsylvania.
“It is a very important program,” she said.
Donald Trump's unexpected election victory in November, coupled with Republican majorities in Congress that are expected to lower corporate taxes, has lowered the market value of the credits.
“The non-bank investors have taken a step back and they are not giving us the same price per credit that they were two months ago,” said Andrew Haines, chairman of the Pennsylvania Developers’ Council, which advocates for production of affordable rental housing.
Housing advocates describe this as a nationwide problem.
“Just the possibility of lowered corporate tax rates is already having an impact — we have heard from developers throughout the country that the prospect of lowered corporate tax rates is either causing investors to hold off on investments altogether, or to provide less equity per dollar of the credit,” said a statement from Diane Yentel, president and CEO of the National Low Income Housing Coalition.
“In either case, it means less money available for the development of much-needed affordable housing,” she said. “If Congress moves on comprehensive tax reform and achieves a substantially lowered corporate tax rate, the impact could be significant. Without additional adjustments to the [low income housing tax credit], its value could be substantially lessened.”
A December letter from the Pennsylvania Housing Finance Agency to developers that were awarded tax credits in July noted “recent disruption and uncertainty in the current tax credit equity market. At this time, we understand that some developments faced with unexpected funding gaps are looking for additional funding sources to cover them.”
Brian Hudson, CEO of PHFA said he doesn't anticipate his agency will be able to make up the difference for every project that has a gap.
“We've got our work cut out for us. We will have some tough decisions to make,” he said.
Some local developers say while their ongoing projects are still moving ahead, they are still concerned about the uncertainty going forward.
“It's a scary thing right now, because no one knows how much the price is going to drop in the future,” said Victor Rodriguez, president of a.m. Rodriguez Associates, Inc. Mr. Rodriguez said both the 46-unit Morningside Crossing and 55-unit Retirement Residences of Glassport developments, which were awarded tax credits in July, are moving forward.
Mr. Rodriguez said affordable housing developers are lobbying for the tax credit to be increased if Congress passes any kind of major infrastructure package.
Others note that the tax credit program has been very successful in the past, has high levels of bi-partisan support, and believe it will ultimately be resilient.
“We think eventually, things are going to settle down to a level that makes these projects still feasible. Affordable-housing developers are among the most creative housing developers that exist,” said Lena Andrews, planning and development officer ACTION Housing Inc., which was awarded $1.1 million in tax credits in July for its Squirrel Hill Gateway Apartments. That project is still moving forward, Ms. Andrews noted.
“Developers tend to be more optimistic. I think that is by nature, our occupation,” said Mr. Haines.
A task force on affordable housing in Pittsburgh last year noted a shortage of about 17,000 affordable rental units in the city. Pittsburgh City Council passed legislation last year to create a trust fund for affordable housing, though it has yet to legislate how it will be funded.
Kate Giammarise: 412-263-3909 or firstname.lastname@example.org or on Twitter @KateGiammarise.
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